RRSPs and TFSAs: Which is right for me?

Canada Life - Jan 15, 2021
Helping you understand what sets these two savings options apart
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With so many savings options available, it can be challenging to find the right fit for your needs. Registered retirement savings plans (RRSPs) and tax-free savings accounts (TFSAs) are two popular savings vehicles. Both options are government registered and provide tax-advantaged savings.

What savings vehicle will work best for you depends on a number of factors, like your age, income, tax rate and future cash flow needs. Understanding the differences and benefits of both options will help you make the best decision for you, now and in the future.

The registered savings benefit

When you put money into a registered or non-registered account, it’s like planting a seed to grow a tree. Income generated from investments held within a non-registered account is usually taxed every year. Gains in the value of investments held within a non-registered account are also taxable when sold. It’s like pruning a tree, slowing some of its growth.

This isn’t the case with money held within an RRSP or TFSA, and this difference in characteristic of registered accounts can help your money grow faster – it’s like watering a tree. The unique tax treatment of RRSPs and TFSAs in addition to the benefit of compounded growth can mean a significant difference to your investments over time. Let’s take a closer look.

Tax-advantaged growth


Contributions to an RRSP give you an upfront tax benefit. You’ll receive a tax receipt for the contribution amount that can offset your income when filing your annual income taxes. It’s almost like paying yourself twice – you pay into your savings plan for your future and you get an immediate tax break.

Any gains in the value of the investments in an RRSP are tax deferred. This means, you’ll only pay income tax on this money when it’s withdrawn from your RRSP at a later date. If you wait to withdraw money from your RRSP until retirement, you’ll likely pay lower taxes because your annual income is likely to be less than when you were working.


Unlike RRSPs, TFSAs don’t give you an upfront tax benefit. TFSA contributions are made with after-tax dollars. Any increase in the value of your TFSA is tax free. You won’t pay any taxes on money you withdraw at a later date.


Want to find out which option works best for you? Get in touch with me today.